Bitcoin (File)

Florida Rep. Matt Gaetz Intros Legislation To Require The IRS To Accept Bitcoin As Payment

Bitcoin (File)
Bitcoin (File)

U.S. Congressman Matt Gaetz (FL-01) introduced legislation Tuesday to require the U.S. Secretary of the Treasury to implement a program to allow federal income tax to be paid with Bitcoin.

Earlier this month, Rep. Gaetz attended the second inauguration of El Salvador’s populist president, Nayib Bukele.

While there, Rep. Gaetz witnessed how Bitcoin, the world’s most popular decentralized digital currency, has helped promote financial stability and job creation in Central America after El Salvador became the first country to adopt Bitcoin as a legal tender in 2021.

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Following El Salvador’s success with Bitcoin and the recent boom in cryptocurrency, Rep. Gaetz introduced legislation allowing taxpayers to pay their federal income tax with Bitcoin.

“My groundbreaking legislation will modernize our tax system by allowing federal income tax to be paid with Bitcoin. By enabling taxpayers to use Bitcoin for federal tax payments, we can promote innovation, increase efficiency, and offer more flexibility to American citizens. This is a bold step toward a future where digital currencies play a vital role in our financial system, ensuring that the U.S. remains at the forefront of technological advancement,” said Congressman Gaetz.

The IRS does not accept Bitcoin or any other cryptocurrency as direct payment for taxes and currently treats Bitcoin and other cryptocurrencies as property, not currency, for tax purposes. This means that Bitcoin transactions are subject to capital gains taxes, like stocks or real estate.

Here’s a summary of how Bitcoin is taxed by the IRS:

  • Buying and holding: There are generally no taxes on simply buying and holding Bitcoin.
  • Selling Bitcoin: When you sell Bitcoin for a profit, you’ll owe capital gains taxes based on the difference between your purchase price (cost basis) and the sale price. The amount of tax you owe depends on how long you held the Bitcoin and your income tax bracket.
  • Receiving Bitcoin as payment: If you receive Bitcoin as payment for goods or services, you’ll need to report the fair market value of the Bitcoin as income.
  • Other transactions: Other transactions, such as trading one cryptocurrency for another or using Bitcoin to purchase goods or services, can also trigger taxable events.

Reporting requirements:

  • Form 1040: Taxpayers must answer a question about digital asset transactions on Form 1040.
  • Form 8949: If you sold, exchanged, or transferred Bitcoin, you may need to use Form 8949 to calculate your capital gains or losses.
  • Form 709: If you gifted Bitcoin, you may need to file Form 709.

The IRS has increased its focus on cryptocurrency reporting in recent years, so it’s important to accurately report all your transactions.

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